Analyst Note| Jaime M. Katz, CFA |
We plan to make only a minor adjustment to our $22 fair value estimate for no-moat Bed Bath & Beyond after digesting third-quarter results. Sales of $2.76 billion were modestly ahead of the $2.7 billion we expected, and EPS of $0.08 came in a penny better than our model, but total same-store sales of 2% fell short of our 5% projection. Physical stores continue to suffer from the broad spread of COVID-19, as indicated by a 17% drop in total store sales and a same-store sales decline of 15%. Conversely, e-commerce again accelerated, with digital sales rising 75%, bolstered by a 77% comp. A less sanguine outlook for the February-ending final quarter of fiscal 2020 was the likely impetus in the roughly 11% postreport share decline. Fourth-quarter sales are now expected to contract at a double-digit clip (much worse than our forecast 3% decline), while shipping constraints and higher freight costs could affect cost metrics.